Best Lump Sum Investment For Retirees/Senior Citizens

By BRINDA JEEVA
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    Retirement is a new stage of life. Whether you are a salaried person or self-employed person, each one of us would like to come out of active working life.

    If you are a salaried individual, you may get pension or annuity fund. You may also receive lump sum retirement benefits like Gratuity, leave encashment, bonus etc.

    Best Lump Sum Investment For Retirees/Senior Citizens
    Accumulation of retirement corpus is only one part of your retirement planning.

    Depending upon ones “retirement corpus” and “expense requirements“, one must do the fund distribution to generate enough income.

    Best and safest investment or saving options to invest lumpsum amount for retirees or senior citizens to get guaranteed regular Income

    Post office and SBI's Senior Citizens Savings Scheme (SCSS)

    The interested paid in on quarterly basis.The interested is credited to savings account opened in the same post office or in saving account in SBI bank.

    Money invested under SCSS also qualifies for deduction under S/c 80C.

    One of the limitation is related to maximum amount one can keep in SCSS A/c. Maximum amount that one can invest in SCSS is Rs 15 lakhs (joint account with spouse). To overcome this limitation of Rs.15 lakhs, one can open multiple SCSS accounts in different banks. SCSS has one very big advantage.

    The interest paid by IPO is @ 8.4% per annum. This is higher than any other monthly income plans in India.

    Fixed Deposit (FD)

    It allows one to earn monthly income without having to take too much risk. The accrued interest gets credited to the savings account on a fixed date each month.We can personally lock all my retirement money in fixed deposit.

    But the problem with fixed deposit is that, all its interest earned is taxable ,so invest atleast 16% of the lumpsum retirement corpes in FD.

    Post Office - Monthly Income Scheme (MIS)

    Monthly income scheme (MIS) is a very safe investment for retired people to generate monthly income.The interest rate can be as high as 7.6% per annum.

    But major limitations of MIS of post office is that maximum amount that can be invested is Rs 9 lakhs in case of joint account (with spouse). For single account maximum investment allowed is Rs 4.5 lakhs. By investing Rs 9,00,000 @7.6% will generate monthly income close to Rs 5,700.

    Irrespective of all limitations of MIS, PO-MIS must be considered by retired people as one of their preferred investment option for retirement money.

    Monthly Income Plan of Mutual Funds (MF-MIP)

    To generate regular income from MF-MIP, retired people must subscribe to dividend option and not growth option.Returns offered by mutual fund MIP's are best compared to all other monthly income plans. On an average, a good mutual fund MIP can yield annual dividend @8.2% per annum.

    Reason to consider MF- MIP as good option:

    1.At times a good MF-MIP can yield even higher returns (more than 8.2% p.a.). On internet we can see MF-MIP yielding 9% per annum. It means, MF-MIP has potential to generate higher returns (net of DDT).

    2. MF-MIP has another advantage. Investing in them allows one to get a small exposure to equity as well. This is good from point to view of investment diversification.

    Pradhan Mantri Vaya Vandana Yojana (PMVVY)

    PMVVY is also a Pension scheme for Senior citizens who are above 60 years of age. The assured return on PMVVY would be 8%. The policy term is for 10 years. Policyholder can opt for monthly, quarterly, half yearly or yearly pension payment. Loan up to 75% of purchase price is available after completion of minimum 3 policy years. Interest on the loan will be recovered from your pension amount.

    As per Budget 2018-19, the maximum investment permissible has been increased to Rs.15 lakhs for a monthly pension of Rs 10,000.

    Equity based BALANCED mutual fund

    Though for a retired person, capital appreciation is not a priority, but it is better to keep a provision for this as well. This is done more to satisfy the urge for earning higher returns.

    Conclusion

    It is important to lock our savings. Locking savings means investing it and not keeping it free in savings account. If this is not done, the money gets spent needlessly. The wiser will be the fund distribution (low risk, just-enough returns), more peace will be bestowed on the retired person.

    Remember, the tax liability on different instruments as well before investing. This will enable better tax planning. 

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